Southwest Airlines employee Sharon Cabello of Oakland, Calif., joined 300 other airline workers in Denver for a marketing meeting Wednesday.

Surrounded by Southwest Airlines employees, chief executive Gary Kelly on Wednesday announces that the carrier will add 18 nonstop flights from Denver International Airport to six new destinations. After the announcement, Kelly dispatched the employees out to the streets of Denver to distribute free tickets, coupons and gifts. <!--IPTC: (JS) SOUTHWEST010908_CM07 - Sharon Cabello of Oakland, CA adjusts her hat as she joined other Southwest Airlines employees in downtown Denver to distribute free tickets, coupons, and gifts on Wednesday, January 9, 2008. CEO Gary Kelly (not in photo) had just announced 18 new non stop flights with 6 new destinations out of Denver. More than 300 Southwest employees are here in Denver for a marketing meeting. Cyrus McCrimmon, The Denver Post-->

Even as Southwest Airlines comes under increasing financial pressure and cuts back in other cities, it continues to expand in Denver.

The carrier, which is working to gain critical mass in Denver and increasing competition against United and Frontier airlines, on Wednesday announced 18 more flights out of Denver International Airport.

Shares of Denver-based Frontier Airlines took a huge hit after Southwest’s announcement, falling 69 cents, or 14.8 percent, to close at $3.96 Wednesday. That’s a 52-week low and well below its 52-week high of $8.03 nearly a year ago.

Southwest, which started flying to Denver two years ago, has about 160 employees in Denver and expects to grow to about 200.

The Dallas-based carrier will have a total of 79 daily flights in Denver as of May 10, when it will start flying from Denver to Los Angeles; San Jose, Calif.; St. Louis; Philadelphia; Raleigh-Durham, N.C.; and San Antonio. Southwest is also adding an additional flight to each of its existing routes from Denver to Austin, Albuquerque and Chicago Midway.

Southwest’s entrance in Denver has put increased financial strain on Frontier, which this week announced it will report a larger-than-expected loss for the quarter ended in December.

Southwest leases five gates at DIA, uses a sixth city gate and could use other city gates and partially used gates on Concourse C.

“There is still capacity out on Concourse C for several dozen additional flights,” DIA spokesman Chuck Cannon said.

Southwest plans to expand its counter space at DIA but has yet to commit to lease more gates at DIA or any gates in a planned Concourse C expansion.

DIA manager Turner West said, “We think we have the ability to accommodate (Southwest’s) needs,” and that the Concourse C expansion would be built regardless of a commitment from Southwest for gates.

While Southwest is planning on growing in Denver beyond the 79 daily flights, whether it announces another expansion soon will depend on how its flights perform, Southwest chief executive Gary Kelly said.

“We’ll be working on that over the next five, six, eight weeks,” Kelly said. “That’s the time we’ll decide if we need more flights in Denver.”

He added that the company needs to be a little more conservative and that may temper its next step. Kelly said Southwest typically grows its presence in a city over a five-year period.

Meanwhile, Southwest is cutting back on some flights in many cities and adding other flights. “We’re trying to slow down our growth,” Kelly said.

Southwest’s contribution to growth at DIA “is great for competition; it’s great for business,” said Denver Mayor John Hickenlooper, who spoke at a news conference with Kelly on Wednesday. “It really helps to open Denver to the rest of the world.”

In spite of Frontier’s financial struggles, spokesman Joe Hodas said Frontier is “competing very well” with Southwest.

“We still have a tremendous amount of customer loyalty here in Denver,” he said.

Hodas said Frontier has learned to compete against Southwest and that Southwest has come under increased pressure from higher fuel costs.

“We’re a different company now, and so are they,” Hodas said.

But, said Port Washington, N.Y.-based airline consultant Robert Mann, Southwest’s expansion means “it will be more difficult for Frontier to continue to restructure itself, and it will put additional pressure on United.” For United and Frontier, “it’s fight or flight.”

Meanwhile, United has been urged to merge with Delta by a hedge fund, while Frontier has been rumored to be a takeover target.